Fukushima Tragedy Drives Expensive Renewables Policy
Under a new incentive program since mid last year, Japanese solar installations are poised to triple from 2012 to 7 GW. This is well ahead of estimates of “only a double” as recently as summer
The average Japanese electricity tariff (2013) is around $0.30/kwh, trailing only a few European markets worldwide – and over 3x the US average. The levelized costs of a recent world scale solar farm (Kyushu Electric), at $0.30kwh, are 2-3x other markets – thanks to higher cost Japanese modules, Japanese labor, Japanese land, and relatively poor Japanese solar radiation. However, an aggressive incentive program — offering $0.39/kwh for power sold back to the grid, has sparked a boom in residential projects.
This is a hard way to substitute for so much lost capacity (25% of the Japanese grid) post Fukushima, as the 10 GW ($40 billion in today’s dollars) nominal capacity contributes less than 2% of total supply, at elevated capital and cost. Japanese-built solar is even more expensive than converting LNG (indexed to global oil prices) to power, but much faster to permit/install (versus new gas fired capacity). Longer term, lower installation costs appear both achievable and mandatory, via accelerated market share for imported (Chinese, Philippine, Malaysian) product and more efficient paths to permitting and installation. Or does fabled Japanese bureaucracy consider high cost, single digit solar market share a reasonable price to pay for continued domestic control?